$47b Fleet sale expected today

Bank of America seen retaining job levels in N.E.

By Steve Bailey, Globe Staff | October 27, 2003

FleetBoston Financial Corp., the last of the big Boston-based banks, is expected to announce today that it is selling itself to Bank of America Corp., the nation's third-largest bank, in a transaction valued at $47 billion, business executives familiar with the deal said last night.

Bank of America, based in Charlotte, N.C., will pay $45 a share for Fleet in an all-stock deal, a 40 percent premium over Friday's closing price, and about in line with other recent acquisitions, according to the executives familiar with the banks' plans.

Details were sketchy last night. But the banks are expected to announce in New York City this morning that Fleet chief executive Chad Gifford will remain as chairman of the combined company, while Bank of America's Kenneth D. Lewis will retain his position as chief executive. Bank of America will replace the Fleet name in the Northeast. In a critical element for Gifford, Bank of America agreed to keep employment in New England at current levels.

Spokesmen for both banks declined to comment last night.

The deal comes as big banks have been putting up improved numbers as the long-awaited economic recovery begins picking up steam. For instance, Fleet, the nation's seventh-largest bank, earlier this month reported that its third-quarter profit rose 17 percent as fees from lending and money management grew and bad loans declined. Bank of America reported that profit jumped 30 percent in the same period as fees from mortgages and its consumer business increased.

For Boston, the sale of Fleet is another in a long line of local institutions to sell to big competitors. A Fleet sale would also mark the second high-profile company with strong community roots and a history of significant charitable giving to agree in recent weeks to give up its independence.

In September, John Hancock Financial Services Inc. agreed to sell to Manulife Financial Corp. of Toronto in a roughly $10 billion deal. Four years ago Fleet and its big cross-town rival, BankBoston, pulled off a stunning consolidation that was designed, in part, to ensure that Boston didn't come just become another branch-bank city for a Bank of America or a Citigroup. It didn't work out that way.

A series of problems that all culminated last year made Fleet a prime takeover target. In a single year Fleet saw its Argentina franchise get into deep trouble, abandoned Asia, shut down high-tech investment bank Robertson Stephens, saw its private equity business get clobbered, and owned up to a mountain of bad corporate loans. In January Fleet said it was laying off 1,900 people, a quarter of those in Massachusetts. At the time, Gifford called it "the perfect storm. The areas we were in are the areas that were hardest hit."

The deal comes as Fleet appeared on the mend. This month's earnings report was the third quarter in a row that Fleet had showed improved numbers. The bank said Argentina was operating on a break-even basis and Brazil was making money. The private equity portfolio had been cleaned up and loan credit quality improved. Fleet just spent $100 million on a advertising brand campaign.

Fleet will fill out a critical piece of Bank of America's franchise, and fulfills the bank's longstanding efforts to move into New England. Fleet dominates New England and is strong in New Jersey, New York, and Philadelphia, all big holes in Bank of America's map.

In 1991, Bank of America made a strong push to buy the failed Bank of New England, but lost out to Fleet. That was the deal that eventually put Fleet in the position to roll up the rest of its New England competitors and dominate the region.

Bank of America dwarfs Fleet. Bank of America has a market capitalization of $121 billion, to $33 billion for fleet. It has $660 billion in assets, to $190 billion for Fleet. It has 133,000 employees, to 47,700 for Fleet.

In the negotiations, Fleet was represented by Morgan Stanley, the investment bank. Bank of America was represented by Goldman Sachs.

Steve Bailey can be reached at 617-929-2902 or at bailey@globe.com. Jeffrey Krasner of the Globe staff contributed to this report.